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Stocks Are For Suckers?

This article was written by in Investing. 12 comments.


The book I recently reviewed focuses on investing in index funds and letting the portfolio sit for decades — “buy and hold.” It’s a strategy that has been popular since the market took a downward spin when the tech bubble gave out. Not everyone agrees that it’s the best strategy.

Mark Cuban, outspoken owner of the Dallas Mavericks and founder of Broadcast.com (which was later sold to Yahoo) believes the stock market is for suckers. According to Cuban, most of those who invest in the stock market aren’t buying real ownership, they are mostly buying a tiny portion of shares discarded by those closer to the company. The only real investment is buying a material percentage of a company, and if you can’t afford to do that, you’re better off in less risky investments like bonds and CDs.

Updated February 7, 2012 and originally published January 4, 2006. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 12 comments… read them below or add one }

avatar Matt

Did you read the whole article? His points were pretty valid. Would you be better off investing the money in yourself like starting your own business, or making sure that your investments are guaranteed not to lose money? I understand that the stock market is a fairly safe bet, but Cuban’s argument is that it is a bet- strictly gambling, unless you can invest enough to have a controlling interest. Should gambling be part of your retirement plan?

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avatar Hazzard

Too bad we aren’t billionaires who can heckle in the first row at the basketball game like he is. I can’t believe that’s good advice. The risk to return in the long term stock market seems reasonable. Invest at 4% in grandmas CD, or seek 9-10% returns in the market long term? I’m going to take the risk for an extra 5% and then just try to time my withdrawal from the market as I get close to retirement.
Hazzard

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avatar Luke Landes ♦127,475 (Platinum)

I read the entire blog entry. I wasn’t giving an opinion on the matter, just pointing out that Cuban believes “buy and hold” to be a marketing gimmick… an opinion generally bestowed upon salesman and those who favor “active trading.” Cuban talks more about investing in yourself and in low-risk CDs and bonds for those who can’t afford to buy controlling portions of companies.

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avatar FMF

“Not everyone agrees that it’s the best strategy.”

You?

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avatar Luke Landes ♦127,475 (Platinum)

Based on the data I’ve seen, “buy and hold” has (or would have) worked for most situations in the last century, on average. I can’t predict whether it’s going to work for me, but all I have to go on is past performance. Cuban makes great points — such as the fact that “buy and hold” doesn’t take real life issues into account, issues like major emergencies that necessitate withdrawals whether the market is up or down.

The biggest issue I see is while averages say one thing, the world is full of varying individuals and no one is “average.”

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avatar klauss

I am sure the investors who had the equivalent of a controlling interest in Cuban’s reality show flop felt like they had made a horrible gamble. Was his money involved in that?

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avatar Dus10

I can see both sides. If you are looking to start a business, invest in yourself. If you are not, however, stocks have been a viable option for investments. Period. People have become quite wealthy off of buying and holding…. just because Mark got lucky once… he thinks he is an expert (although I am being a synic, I do had a great deal of respect for him).

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avatar Big Mike

“most of those who invest in the stock market aren’t buying real ownership, they are mostly buying a tiny portion of shares discarded by those closer to the company. The only real investment is buying a material percentage of a company”

This kind of sounds like something I wrote about recently in my own blog about overpaid CEOs. Yes, the CEOs and other execs and insiders make more money than you do by buying a tiny percentage of the company.

But for the astute contrarian investor who knows what he’s doing, there’s a world of money to be made by investing in stocks. Although I’d agree that people who buy individual stocks and who don’t know how to read a balance sheet, those people are suckers.

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avatar Loi Tran

Stocks are still a good investment. Investors just need to do research before investing. Everyone has their own opinions and can do what they want with their money.

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avatar someone else

I know this is an old article, but I want to say that the stock market isn’t everyone’s answer to retirement. Some people invest in real estate (not just homes) and do fine. Others take a different route.

I’m very wary of the herd mentality when it comes to the “right way” to retire with ease. Who knows: maybe the next 15 years will be the worst in the history of the stock market. There’s always a first time.

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avatar Andy

How are your stocks looking now? Invest in something solid that is not just a maze of paper.

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avatar ghgh

If you don’t understand how it works entirely you shouldn’t be getting tied up in it. You wouldn’t try to make your own spare parts for your broken microwave door would you?

Most people don’t understand it enough and it is designed for that purpose as well. Stocks are just like taxes. Over complicated for the purposes of hey look at this shiny tree while I pull mr. 12″ out of you without you noticing until you are mysteriously sore the next day.

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